When does a works council have to be established under Dutch law?

Under the terms of the Dutch Works Councils Act (WCA), the establishment of a works council is mandatory for any company that is active in the Netherlands and regularly employs at least 50 employees. The works council needs to be set up in order to ensure the proper functioning of the company and the effective consultation and representation of those working in the company.

A works council must be established if 50 persons or more are “regularly” employed within the company. “Regularly” is defined as: “more than 50 employees are employed, on average, within the enterprise”. If for a short period of time, more than 50 employees are employed within the company, there is no immediate obligation to establish a works council. Likewise, if fewer than 50 persons are employed within the company for a short period, the works council can nevertheless continue to operate. But whenever 50 persons or more are regularly employed within the company and the existence of the works council is beneficial to the proper functioning of the company, a works council should be established and maintained.

In certain situations, the company may be obliged to establish a joint works council (gemeenschappelijke ondernemingsraad), group works council (groepsondernemingsraad) and/or a central works council (centrale ondernemingsraad) if this is beneficial to the proper functioning of the company or companies.

What are the consequences of not having a works council when this is legally required?

Not having a works council established when this is required under the terms of the WCA can have serious impact on the company. Under the WCA, any party concerned (e.g. an employee or trade union) may initiate legal proceedings requesting the court to order the company to comply with its legal obligation to establish a works council. If a situation arises in which the company has made or intends to make a decision regarding an important organisational change that would impact on the workforce, for instance, employees could ask the court to suspend this organisational change until a works council has been established. Whether the court agrees to suspend the decision or its execution will depend on the specific circumstances of the case, such as whether employees have previously requested the establishment of a works council. However, if the court does decide to suspend such a decision, this would lead to a significant delay to the relevant organisational change and its implementation.

Furthermore, the company could be faced with the following consequences:

  1. The (unlawful) failure to establish a works council may lead to delays in handling an application for a collective or individual redundancy permit at the Dutch Employee Insurance Agency (UWV) or the refusal of a requested permit.
  2. The lack of a works council may be taken into account in court decisions e.g. as to whether the termination of an individual employee’s employment contract is permitted and what (additional) compensation that employee is entitled to.
  3. Under certain circumstances, it may be a reason to initiate inquiry proceedings (enquête procedure), which would make it easier for trade unions to have influence on the organisation.
  4. If an employer wishes to amend the terms and conditions of employment unilaterally, the lack of a works council could be a disadvantage. Obtaining the consent of the works council with regard to a unilateral change may be a factor in a court’s assessment of whether an employer has made such a decision in a reasonable manner.
  5. If no works council is established, the employer cannot deviate from certain obligations under the Working Conditions Act (Arbeidsomstandighedenwet), the Working Hours Act (Arbeidstijdenwet) and the Flexible Working Act (Wet flexible werken), since such deviations are only possible in consultation with the works council.

What if employees are not interested in membership of a works council?

A lack of interest among employees in becoming a member of the works council does not absolve the company of its legal obligation to establish a works council. The company cannot use the fact that its employees have never requested the establishment of a works council or have never expressed an interest in membership of a works council as a reason for inaction. It is the company’s responsibility to actively assess whether a works council can be established. This means that the company must regularly assess whether the employees are interested in membership of a works council, preferably by organising elections.

If the company is able to demonstrate that – despite reasonable efforts – there is no real  interest in membership of a works council, the legal consequences of not having established a works council, as outlined above, will be limited. It is therefore advisable to ascertain whether employees wish to establish a works council in the company on a regular basis, and to document these efforts comprehensively.